This copy is for your personal non-commercial use only. To order presentation-ready copies of Toronto Star content for distribution to colleagues, clients or customers, or inquire about permissions/licensing, please go to: www.TorontoStarReprints.com

VANCOUVER—Two former senior civil servants say the New Democrat government needs to do much more to reverse its predecessor’s policy of “bleeding” cash from BC Hydro through the skyrocketing use of deferral accounts.

The accounting practice allows a government to leave bills unpaid until later in order to spread out one-time costs. But now BC Hydro’s former CEO is speaking out, alleging that the previous BC Liberal government abused deferral accounts to turn the Crown corporation into a general credit card.

As a result, BC Hydro’s deferral accounts ballooned from just two worth $115 million in 2001 to this year’s 29 accounts of nearly $5.5 billion. Last week saw the province’s auditor general criticize the accounting practice for a second year in a row.

Deferral accounts are “commonly used by utilities across North America,” BC Hydro spokesperson Tanya Fish said in an email. “They are normally used to match costs with benefits to customers (and) capture differences between forecast and actual costs typically related to uncontrollable factors.”

According to the former CEO of BC Hydro, economist and ex-senior civil servant Marc Eliesen, the practice was unheard of during his time at the utility’s helm from 1992-94, nor when he headed up its counterparts Ontario Hydro the two years prior and Manitoba Hydro from 1984-88.

Article Continued Below

It would have been “inexcusable and unacceptable,” he told StarMetro, to rack up anywhere near BC Hydro’s current $5.5 billion in deferred debts.

“That’s not the way to run a business; it’s going to catch up to you,” Eliesen said in a phone interview. “You can’t run a peanut factory or any company, public or private, that way.

“Building it up like that was totally inexcusable and fiscally irresponsible.”

At the same time, he said, the government was “bleeding BC Hydro by demanding and extracting huge dividends” that normally would have been used to run its operations — demanding parts of its profits “just to cover their own balance sheets.”

But according to Tracy Redies, the BC Liberals’ BC Hydro critic and MLA for Surrey-White Rock, the previous government had good reason to use the deferral accounts: to ensure ratepayers wouldn’t be forced to suddenly pay higher bills.

Prior to entering politics, Redies sat on BC Hydro’s board of directors from 2014 to 2016. She said the Crown corporation had a long-standing 10-year plan to pay off its deferral account debts.

“Honestly, I’ve been in finance for years, and it’s one of the most complicated aspects of financial accounting I’ve come across,” she said in a phone interview. “The public should know that Hydro wasn’t going out willy-nilly putting amounts into deferral accounts; there was a robust process.

Article Continued Below

“When I was on the board, we were trying to make the best decisions we could to make sure the utility had a plan to bring these deferral accounts down over time, while still investing in plants, equipment and grids, dams … and to make sure rates are affordable for British Columbians.”

Another former public servant, Rick McCandless — whose 35 years in B.C. government included assistant deputy minister and chief financial officer of the Ministry of Attorney General and a senior analyst position on the province’s Treasury Board — echoed Eliesen and the NDP’s concerns over deferral accounts.

He said the province needs to not only grant greater autonomy to the B.C. Utilities Commission (BCUC), which reviews rate increases and what BC Hydro does with profits, but also needs to consider beefing up its budget and level of in-house expertise.

“The NDP have already decided they don’t want (BCUC) to be independent; they told them what to do,” McCandless said by phone. “It’s a creature of the government so it has to listen.

“The NDP government is treating the BCUC, independence-wise, just the way the Liberals did: keeping hydro rates below where they should be while still declaring huge profits out of BC Hydro.

“The fundamental question is: Are you gaming the system or are you being honest? They’ve abused the accounting system that was in place, for good reason, to spread out the hills and valleys of your costs.”

McCandless also proposes what both the Ontario and federal governments have: an independent budget officer who reports to the Legislature and reviews the actual costs of policy decisions.

The province’s Finance Minister Carole James attacked the BC Liberals for getting the utility into its current mess.

“It’s just pushing costs off for future years,” James said. “It’s not paying off your bills now, but putting them to the future and saying, ‘We’ll worry about it later, we’re not going to pay them now.’

“It makes your bottom line look better. Deferral accounts in themselves have a purpose. There are opportunities to use them to address unexpected financial issues that arise — a low-water year for example.”

James said her government is committed to heeding the auditor general’s warnings, one step at a time. She slashed nearly $1 billion from a surplus in public accounts released Oct. 28, bringing the debt to $4.5 billion.

“We’re not going to put off those costs any more, to put the responsibility on future ratepayers,” she insisted.

Redies accused the NDP of “talking from both sides of their mouth” because they also called for a hydro rate freeze in their election campaigning, implying a direction to the BCUC. And if rates have to rise for households, the NDP would have to answer to voters.

“They can’t have their cake and eat it too,” she said.

Eliesen said the B.C. NDP’s nearly $1-billion “fix” to the much larger deferral accounts isn’t enough. It’s not just about paying off the remaining $4.5-billion debt because who’s to stop it simply happening again when politically expedient?

“The current government now has gone down $1 billion in taxpayer revenues,” he said, “but we still have to deal with this long-term problem: there is insufficient money charged to the ratepayer in order to cover BC Hydro’s costs.”

David P. Ball is a Vancouver-based reporter covering democracy and politics. Follow him on Twitter: @davidpball

More from The Star & Partners

LOADING

Copyright owned or licensed by Toronto Star Newspapers Limited. All rights reserved. Republication or distribution of this content is expressly prohibited without the prior written consent of Toronto Star Newspapers Limited and/or its licensors. To order copies of Toronto Star articles, please go to: www.TorontoStarReprints.com